Ladies and gentlemen, welcome to the full year results 2021 conference call and live webcast. I am Alice, the conference call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and 1 on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Philipp Gmür, Group CEO. Please go ahead, sir.
Thank you. Ladies and gentlemen, welcome to our analyst conference call on the full year results of 2021. Within the next 30 minutes, we would like to give you detailed information on our business development and the key financials of the reporting period. Who is we? I welcome in this conference call next to me, our CFO, Annelis Lüscher Hämmerli. She will go through the financial figures after my short introduction and overview.
After Annelis Lüscher Hämmerli's update on the financial figures, I then would like to give you an update on the implementation of our strategy, Helvetia 20.25, and then of course open for a Q&A session. Let me now turn to slide 4. The highlights at a glance. Helvetia can look back on a very successful year, 2021. I would like to point out 3 highlights of the past year in particular.
First, we are very pleased with Helvetia's strong profitable growth, the increase in profit and Caser's contribution to the result. Second, the 2nd highlight is the proposed dividend increase of 10%. This gives our shareholders a dividend yield of 5.1% with a dividend of CHF 5.50 per share. Third, we have made a dynamic start to the new strategy period and are approaching our strategic ambitions. The unchanged positive development of Smile stands out here. Building on this development, we will scale Smile on a European level.
I would also like to mention our sustainability strategy and the very good start of the strategy implementation in all different business segments. More on all that follows at the end of the presentation. Now I would like to hand over to our CFO, Annelis Lüscher Hämmerli, who will present you the key financial figures of 2021.
Ladies and gentlemen, I would also like to welcome you from my side. One year ago, when I presented the results for the first time, I just had the impression that Helvetia is a good company. Now, 1 year later, I know it. Therefore, I am especially pleased to present you this year's or last year's figures as they are very good. Let's turn to the 1st page of the key figures. Helvetia Group looks back on a very successful business development in the past year. Our core business is in good shape, and we are well on track to reach our financial targets. The return on equity increased to 10.3% and lies well within our target range. This is based on a strong net income of CHF 520 million.
These figures underline the strong and profitable growth Helvetia achieved in its core insurance business, as well as with the generated fee income. Business volume increased by 15% in original currency to more than CHF 11 billion, while fee and commission income grew by more than 50% to CHF 354 million. At the same time, technical profitability of both our non-life and life business developed very solidly. Despite an exceptionally high claims burden from natural catastrophes, the net combined ratio in non-life remained on a good level at 94.8%, demonstrating the portfolio's strong resilience. In life business, the new business margin was nearly stable at 2.5%, well within our target range. On the second page of the key figures, we are now. Helvetia has not only strong results, but they are also built on a strong foundation.
Helvetia made significant progress on operational efficiency, capitalization, and dividends. With regard to operational efficiency, the aim is to realize cost efficiencies of CHF 100 million by 2025. Helvetia has already achieved efficiencies of CHF 39 million in 2021. This is equivalent to more than a 3rd of the 5-year target. Our capitalization remains at a strong level. This provides a valuable safety net in uncertain times. On the one hand, this is demonstrated by the financial strength rating of A+, which has been upgraded by Standard and Poor's in September 2021. Our target rating of A has thus been exceeded. On the other hand, Helvetia's regulatory solvency stays at a very healthy level. We estimate our Swiss Solvency Test ratio to be above 240% as of January 1, 2022.
Based on our solid capitalization and the strong results, the board of directors proposes a substantial increase of the dividend per share of 10% to CHF 5.50. This reflects our successful business development as well as the strengthening of our earnings and dividend capacities through the Caser acquisition in 2020. By growing profitably both organically and inorganically, Helvetia has built a strong basis to deliver future dividend growth. With this increase in dividends, Helvetia is on a reliable path to reach its target of cumulatively distributing dividends of more than CHF 1.5 billion by 2025. The next slide provides you with an overview of the net income after tax of the individual segments and business areas as well as its main drivers. Net income increased to CHF 520 million in 2021.
This strong result is based on a solid technical development and an excellent profit contribution of Caser in the amount of CHF 72 million. Both the net technical result in non-life and the margin after cost in life benefited from the quality of the portfolios and the contribution of Caser. They improved despite an exceptionally high impact from natural catastrophes in non-life and a non-recurring positive one-off effect in the prior year in life. The large storms and floods in June and July caused net claims of CHF 126 million before taxes for the group. This has mainly impacted Switzerland and Germany. Favorable investment results supported the net income. In light of the recent market turbulences resulting from the war in Ukraine, please let me emphasize that our direct asset exposure to Russia and Ukraine is zero. Let's now look at the individual segments.
Switzerland clearly increased its results. Compared to the previous year, Switzerland recorded a significantly higher result of CHF 490 million after 2020 had been affected by the pandemic. In Swiss non-life, the technical results proved very solid in view of elevated claims from natural catastrophes. Non-recurrence of COVID-19 losses in the prior year and a positive one-off effect attributable to an adjustment of reserves in the 1st half year had a partly compensating effect. On the cost side, realized efficiency gains had a positive impact. At the same time, strong growth of the B2B2C business led to an increase in acquisition costs. In the Swiss life business, the margin after cost remained on a very robust level despite the non-recurring positive one-off effect in the risk result of the prior year.
This is mainly attributable to a stronger savings result due to further decreasing technical rates. The strong performance of the financial markets in 2021, mainly from equities and real estate, supported the positive development of the life results in Switzerland. Also, Europe clearly increased its results. In the Europe segment, net income after tax increased to CHF 196 million. The development was positively influenced in both the life and non-life business areas by solid technical development, the 1st full year co-inclusion of Caser, and stronger investment results. Caser contributed an excellent profit of CHF 72 million to the segment results. In non-life, the net technical results remained close to the previous year's level. Our profitable organic growth and the contribution of Caser compensated for a normalization of claims frequencies.
These have been reduced in individual lines of business in the prior year because of the lockdowns. The life business in Europe showed an increase in the margin after costs. The savings, risk, and fee results all improved. This is attributable to strong growth of investment-linked products and the positive impact of Caser. Also, specialty markets clearly increased their results. The net income of the specialty market segment amounted to CHF 62 million, a significant increase compared to 2020.
The increase was driven by an improved technical development based on profitable growth and related economies of scale, and a higher investment result due to well-performing equity markets. In the corporate segment, the net result of CHF -157 million was somewhat below the prior year. The decrease is primarily attributable to a negative currency impact from the liquidation of a known investment fund.
For the financing of Caser, we have issued a hybrid bond in June 2020. The financing cost increased as this bond is now recognized for a full year and not only for half a year. Let me continue with our growth in business volume on the next slide. Helvetia was growing profitably in 2021 and achieved a total business volume of CHF 11.2 billion. This equates to a currency adjusted increase of 15% over the previous year. The growth was driven by a remarkable organic increase in non-life and investment linked life business, as well as the first full year inclusion of Caser, which contributed around 60% to total growth. Almost three-quarters of Caser's business volume relates to non-life business. In Switzerland, Helvetia grew its business volume by 2.6% in original currency.
Being a strong growth driver, the non-life business increased by 15.5% in original currency. This was attributable to the following three components, the traditional non-life business, the B2B2C business, and Smile. With a broad-based growth rate of over 4% in the traditional non-life business, we significantly strengthened our market position in our profitable Swiss core business. With the growth in the B2B2C business, we have set a solid anchor in the new business area of embedded insurance. Remarkably, online insurer Smile increased its premium volume by 11.8% to CHF 111 million. In the life business in Switzerland, we recorded a very successful development of the investment-linked products in individual life. The growth in this line of business was over 17% in 2021.
Business volume of group life decreased due to the market-wide trend of a shift from full insurance to semi-autonomous solutions. Business volume of the Europe segment grew by 31.5% in original currency, driven by both organic growth and the first full year inclusion of Caser. In the non-life business of the Europe segment, Helvetia was able to grow by 4.4% organically. Growth was above market level in all countries and broad-based across lines of business. In life insurance in Europe, organic growth amounted to almost 12%. This increase was driven by remarkable growth rates with investment-linked business in all country markets. The business volume of the specialty market segment also developed very positively. It grew by 12.6%.
Besides the development of new lines of business in line with the strategy, Helvetia also benefited from favorable price effects, which accounted for around a third of the growth in this segment. Helvetia is not only strengthening its core business through profitable growth in the insurance line of business, Helvetia also significantly increases its fee income. The group's fee and commission income rose by 56% in original currency to CHF 354 million. A strong organic development of +13.2% in original currency was mainly driven by asset management fee income due to higher volumes. Both new assets and the rise in market values contributed to this. In addition, Caser and its non-insurance business, SIS, were a strong growth driver. Caser generated a fee volume of CHF 212 million in 2021.
With this, we are moving to the next slide and the net combined ratio. The year 2021 was facing an elevated claims burden from natural catastrophes because of an exceptional number of large storms and floods in June and July 2021. Taking this into consideration, our net combined ratio proved to remain strong and very robust at 94.8%. The claims ratio only increased by 0.9 percentage points compared to the prior year, underlying the resilience of the portfolio.
The development benefited from non-recurrence of COVID-19 losses, which have impacted the prior year, and a positive one-off effect in Switzerland in the first half year related to a periodic review of the level of reserves. In addition to this, Helvetia recognized the normalization of claims frequencies in individual lines of business after a reduction in the prior year during the lockdown period.
The cost ratio, on the other hand, slightly improved by 0.1 percentage points. The administration cost ratio improved significantly. Our efficiency program and our profitable growth make their marks. This shows that we are well on track regarding our financial target and on cost efficiency. The positive impact on the administration cost ratio more than offset an increase in the acquisition cost ratio. On the next slide, we will have a close look on the new business margin in Life. The new business in the Life business area developed well in 2021. Helvetia has increased the new business volume measured by the present value of new business premiums by a strong rate of 16.5%. Growth was driven by the Europe segment, where each country market reported an increase. The main contributor was investment-linked business.
Additionally, the inclusion of Caser had a positive effect on the volume of the new business, as Caser had not yet been included in the 2020 figures. Growth of new business was profitable, with the value of new business increasing by 10.6%. Accordingly, the new business margin remained close to the level of the prior year at 2.5%, and thus well within our target range of 2%-3%. This slight decrease resulted from a minor negative effect of including Caser. It was partly compensated by improved cost assumptions, model changes, and higher interest rate assumptions. On the next slide, I would like to give you an update in terms of our financial target on cost efficiencies.
With our new strategy, Helvetia 20.25, we have introduced a financial target of realizing cost efficiencies amounting to CHF 100 million by 2025. In the 1st year of working towards this target, we have already made good progress. Helvetia has realized efficiencies of CHF 39 million in 2021. All three segments, Switzerland, Europe, and specialty markets, contributed to this success. About half of the efficiencies were realized in Switzerland. Europe and specialty markets each contributed about a quarter to the total number. The realization of cost efficiencies in 2021 was based on 2 main drivers. First, the efficiency program we have started as part of the strategy showed its effect. Second, efficiency gains incurred as a result of the strong and profitable growth in non-life. Let's now have a look at the operating cash production we have generated in 2021.
The operating cash production of CHF 322 million is another indicator of our successful business development in 2021. It was strong across all segments and business areas. Compared to the prior year, it slightly increased. Therefore, we were able to compensate for a one-off benefit in the prior year due to proceeds related to the launch of a third party Swiss property fund. Life business, on the other hand, showed an increase which is mainly attributable to a positive development in Switzerland. Total operating cash production also includes a contribution from Caser in the amount of EUR 24 million, the same level as in the prior year. Our operating cash production is a strong basis for our dividend policy.
It comfortably covers the recommended dividend distribution of CHF 292 million, and therefore ensures a sustainable payout to shareholders in line with our dividend policy. Helvetia pursues a dividend policy of paying out sustainable dividends to its shareholders. That means that we aim for a yearly increase of the dividend per share, or in exceptional years, such as 2020, to at least keep it stable on the level of the prior year. For 2021, Helvetia's board of directors will therefore propose a substantial increase of the dividend to CHF 5.50 per share.
This 10% increase reflects a regular increase based on the successful business development in 2021, and it is based on the additional profit and dividend potential that we have acquired with Caser. Shareholders are now benefiting from this acquisition through an additional one-time raise of the dividend per share.
This leads to an attractive dividend yield of 5.1%. Now let me conclude. 2021 was a very good year for Helvetia. Why? First, we have been able to grow our business profitably, both through broad-based organic growth as well as through the successful contribution from Caser. Based on this, Helvetia generated a strong net income of CHF 520 million. Second point, at the same time, we kept our capitalization on an excellent level. This is underlined by the upgrade of our S&P rating to A/A+ in September 2021. Our strong regulatory solvency measured by the SST ratio, which is estimated to be above 240%. Third, the profitable growth and ongoing strong capitalization enable us to increase the dividend per share by an attractive 10%.
Shareholders thus benefit from Helvetia's successful development in 2021, and in particular, the acquisition of Caser the year before. These 3 points made 2021 a success for Helvetia. On that note, I will now hand over to Philipp Gmür again.
Thank you, Annelise, for presenting the financial figures of the past financial year. A year ago, we presented the Helvetia 20.25 strategy. In June 2021, we gave a more detailed insight into the new strategy at our capital markets day. This was followed by a first strategy update on the occasion of the half year results in September 2021. On the next slide, I will give you an overview of the current implementation status. Let us start on slide number 18. With the new strategy, we are pursuing the ambition to be best partner for financial security and setting standards in customer convenience and accessibility. In order to achieve this ambition, we have defined 4 different strategic priorities. We embrace customer convenience, we have the right offering, we grow profitably in our core business, and we make use of new opportunities.
This slide provides an overview of the most important achievements for each strategic priority. The first one, customer convenience. We are, for example, investing in automation and improved claims processes in all markets. In Austria, for instance, we acquired Faircheck last year, which is the leader in the Austrian market for independent claims assessment. The right offering. Among other things, we are focusing strongly on SME business in all segments. Here, for example, we are building in Switzerland an ecosystem around Atlanto, a service platform which relieves SMEs of administrative tasks such as financial accounting and the preparation of offers, order confirmations, delivery notes and invoices.
Living customer convenience and providing the customers with the right offering leads to profitable growth. The last financial year's results have shown that we are very successful in this regard. Once again, I would like to emphasize the organic growth in all segments.
The basis for this is, among other things, further corporations and the use of sales capacities across all our sales channels. Fourth, we use new opportunities. The development of the partner business was very successful. With this so-called B2B2C business, we are taking a big step in customer access, which is part of our strategic ambition. We are present whenever insurance needs might arise. With that, I would like to turn to slide 19. For several years now, we have been able to report on the very pleasing development of Smile, the leading Swiss online insurer.
This development continued. Last autumn, Smile launched a freemium offer. This allows non-customers to experience Smile services as well. Smile established itself as a digital lifestyle brand and is, so to speak, the Netflix of insurance. Significant growth of around 12% last year with unchanged good profitability.
Smile has now over 165,000 customers in Switzerland. That's why, in line with our strategy, we want to make Smile a European unit. This is another step towards achieving our vision of being the best partner for financial security and setting standards in customer convenience and accessibility. We are also responding to the increasing importance of digital channels and business models. We will start in Austria this year. Now let us turn to slide 20. How do we do that? With the European scaling of Smile, we are exploiting digital growth potential. The chosen approach builds on the very successful Swiss model, a profitable unit in Switzerland with a combined ratio of around 90%, a solid basis. A consistent customer experience is ensured with a uniform front end across all markets.
At the same time, however, Smile's European operations will be embedded in our local units. Among other things, this allows us to build on existing IT infrastructure, which allows for cost-efficient scaling. There is no need to build our own expensive IT platform. Thus we rely on the interaction of a service unit which takes care of the customer presence and the existing market units whose infrastructure can be used. As already mentioned, the start will be in Austria and Spain will follow next year. With this step, we are strengthening our profitable core business with a complementary business model. We are pursuing ambitious goals and working towards a number one position in the Austrian online insurance market. Let me turn to slide number 21 and talking about sustainability. A year ago, we presented our purpose to you.
Life is full of risks and opportunities, and we are there when it matters. We also want to live up to this purpose in terms of sustainability. As a European financial services provider, Helvetia want to contribute to the sustainable development of the economy and society. In doing so, Helvetia applies the concept of double materiality and focuses on priority areas that are relevant to its stakeholders and its industry. The sustainability strategy 2025, therefore focuses on four areas, the environment, the products, the investments, and last but not least, culture and governance. We have also set ourselves a clear goal in the area of sustainability. We want to improve our MSCI rating to at least single A by the end of 2025.
On slide number 22, you see that the implementation of the sustainability strategy is carried out along six broad topics that can be assigned to the four areas mentioned above. In the area of environment, we focus on limiting climate change and its consequences. In the area of products, the focus is on sustainable products and the integration of sustainability aspects into underwriting. In the area of investments, the focus is on the topic of responsible investing. Helvetia has the objective of achieving an attractive risk-adjusted return, while at the same time benefiting society and the environment.
Three topics are assigned to the culture and governance area. It is sustainability culture and governance, sustainability risk management, and responsible workplace. This implementation framework forms the basis for achieving our sustainability goal, namely improving our MSCI rating to at least single A by 2025.
This ambition is based on a solid foundation. The insurance business is long-term oriented. Therefore, acting sustainably is part of our DNA. That is why our sustainability strategy does not start with zero. As you can see in this overview, we have already achieved a lot over the past years. I would like to highlight the significant reduction of the CO₂ footprint in the business activity. Since 2017, we have completely offset our CO₂ emissions. First, sustainable products have already been launched. For instance, fund products in life insurance that invest sustainably. Signing the UN Principles for Responsible Investment in 2020 and adopting a responsible investment strategy in 2021. In Switzerland, the We Pay Fair certification confirms equal pay at Helvetia. We now want to continue consistently along the path we have chosen.
Ladies and gentlemen, let me wrap up and give a short outlook. In summary, Helvetia achieved a strong performance last year, both in terms of profitable growth as well as in the dividend and progress on our strategic ambitions. Based on the successful last year, the outlook remains ambitious. We want to continue our profitable growth. We are well on track to continue our current very attractive dividend policy. We are very well positioned in our segments Switzerland, Europe, and specialty markets. With the scaling of Smile in our European units, we are further strengthening our core business.
Helvetia is therefore making good progress towards achieving its financial targets and creating added value for all stakeholders. This brings us to the end of the presentation. Annelis and I would now be pleased to answer your questions. Thank you for your attention.
We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the Touchtone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and 2. Anyone who has a question may press star and 1 at this time. The first question comes from the line of Simon Fössmeier with Vontobel. Please go ahead.
Well, hello everyone. Two questions if I may. First is on life insurance. Life net profit is the highest in a number of years. If you could help us maybe in kind of calculating what you think is the future run rate from net profit and life. Also, I was wondering how much of that profit increase comes from the new tariffs that you implemented in the Swiss BVG business. The 2nd question relates to non-life. On the occasion of your investor day in summer last year, you pointed to a number of growth initiatives, two of which were reinsurance in Eastern Europe and one was aviation.
Obviously, those areas look maybe a little bit less attractive than they did when you thought about your strategy plan. I was wondering if you see a delay or a change in your growth ambitions there. If I may squeeze in a 3rd question on Smile. If you see any substantial investment needs for the expansion there. That's it. Thank you.
Thank you. If I understood it correctly, there are 3 different questions. The 1st one deals with the future run rate of the life profit and the life business. How much of an increase we see from new tariffs and so on. The 2nd goes with non-life change in growth ambitions, specifically in the active reinsurance business. The 3rd question deals with Smile. Let me start with the third question and then hand over to Annelis. Of course, Smile comes up with some investments. However, as we are calculating them, we think that they're very, very moderate. Why that? Unlike other competitors, we are not establishing a proprietary IT system in all different country markets. To the contrary.
What we are exploiting across our country markets is the front-end system, which is the same for each and every country market, more or less. We are like combining the front-end system of Smile with the back-end systems in the different country markets. That helps us to be very fast. We have an advantage in terms of time to market. It's very cost efficient because we have an already existing basis of the different back-end systems in the various country markets. We are calculating with quite moderate investments in Smile. Now, for the question dealing with the active reinsurance, I hand over to Annelis.
Yes, thank you. When introducing the new strategy, we also confirmed that we want to grow in the area of active reinsurance and also to grow this unit or this business unit. Why is this interesting? This is very interesting because we can profit from a diversification in the required risk capital by adding this active reinsurance business. That is, as you know, not possible for the direct investor or the shareholder to achieve this diversification benefit. I'm not sure if I did understand this right. You said something of Eastern Europe. It was never our strategy to grow active reinsurance in Eastern Europe. Just to make that clear.
Okay. Understood. Yep.
We follow.
Yeah.
A strategy in different lines of business, which we have gradually built up over the recent years and which we are continuing to building up in the area of liability, property, motor, and engineering, and also in biometric risks in active reinsurance. We do that globally. That's correct. In the U.S. and also in Europe and to a smaller part in Asia. To come to the first question you had on life insurance. The life result in 2021 benefited from different effects. The first one is a very good savings result. This was driven by various effects, by the somewhat lower technical rates, for example, and also some benefits from the interest rate side versus. Yes.
The fee result benefited from strong growth in investment-linked products. Whereas the risk result is a bit smaller than in 2020. Maybe you remember in 2020, we'd had a special effect in the risk results due to a favorable effect on this result due to the change in tariff in 2020. The cost result remained more or less stable. When looking ahead to the next years, we are very comfortable with the new tariffs as they ensure profitable growth. The development of the life result will, of course, also depend on the interest rate levels. What do I mean by that? If we continue to have low interest rate levels, then the classic life insurance product will not be very attractive as it can only give very low guarantees.
However, if interest rates go up in the near future, then the traditional life products may become attractive again and will, of course, also influence our results.
Okay.
Great. That's right. Yeah. Thank you very much. Very helpful.
You're welcome. Let's go with the next question, maybe.
The next question comes from the line of Peter Eliot with Kepler Cheuvreux. Please go ahead.
Thank you very much. If I could start on slide 14, please, the non-life combined ratio components and thank you very much for the underlying PYD disclosure, which is helpful there. If I look at the current year claims ratio, and last year you said it was 55.3% ex-COVID, so it's gone up by 1.6 percentage points. I guess I was a little bit surprised at the increase, 'cause if I look at the half year, you showed a 3.5 percentage point improvement year-on-year. It seems to suggest quite a big deterioration in H2. Is that all due to the sort of post-COVID recovery and frequency that you mentioned?
If that is the case, then should we expect that sort of H run rate to continue? That was the first question. The second question is, if I look at the admin cost ratio there, it's come down, you know, 9.2%-8.2%. If I apply those percentages to your premiums, it suggests that admin expenses only rose by CHF 20 million. If I look in your annual report, they seem to be increasing by CHF 70 million. I'm just trying to understand what's happening there. I was wondering if you could help on that front. Maybe for my third question, you mentioned the direct exposure to Russia-Ukraine being zero, essentially. Could you just sort of mention what risks you see in terms of indirect exposure?
Possibly one aspect there is aviation that Simon just touched on and the aviation leasing. I'd be interested to hear what risks you see there. Thank you very much.
Okay, Peter. There are 3 questions. The 1st one deals with the run rate of the combined ratio, the 2nd with the admin costs, and the 3rd one, Russia-Ukraine. I go ahead with the first question and then hand over to Annelis. You know, there is no such guidance as to a run rate of the combined ratio except the corridor of 92%-94%, which is, of course, our hard target. As you mentioned, we have special effects in 2020 with COVID. At the same time, of course, now in 2021, we had the biggest NatCat events ever in our book. However, the book is pretty resilient, which is reflected in a combined of 94.8.
We could pretty much, you know, offset this NatCat events by a good portfolio, which comes up with a pleasing run rate. Our combined ratio target remains unchanged between 92%-94%. Now, the other questions, Annelis, admin cost and Russia, Ukraine.
I will first start with Russia and Ukraine. As concerns the direct exposure, we have said we have zero exposure towards Russia and Ukraine, and also zero exposure to Belarus. On the passive side, we have some direct exposure in the low double-digit million CHF of premiums. What nature do these exposures have? Imagine, for example, a Swiss watch company who has stores all over the world and which is insured by us, and logically, such a company also has a store in Moscow, for example. We have some small exposure, non-relevant exposure to Russia on the passive side. Now, what concerns the indirect effects.
One indirect effect would of course be the effect on the whole economy and the possible recession, and therefore pressure on the financial markets. The other thing that we discussed and are looking at closely is inflation due to supply chain issues, due to shortages in certain materials coming and commodities coming out of Ukraine and Russia. Concerning the general market impact of this crisis, we have already in January adapted the hedging position on our equity portfolio. On the inflation side, since the last autumn, we have started to adapt the prices to increasing inflation in non-life in our various country markets. We are together with a very strong solvency position well-equipped for whatever turbulences may come.
That was on Russia and Ukraine, and now regarding the admin cost ratio, there it's important that we plan that the admin costs will reduce each year in the future. We have a strong eye on the admin cost ratio and, I'm sure that we can increase the profitability of the portfolio.
Thank you very much. I mean, I guess my one specific area of interest on the Russia-Ukraine or the general crisis was the aviation exposure. So-
Yeah. Sorry.
I don't know.
Yeah. Sorry, I forgot that part of the question. We have no aviation leasing exposure. We have also no political risk exposure.
Great. That's very helpful. Thank you very much. On the admin cost ratio, I mean, I guess my specific question was just trying to reconcile the slide with the annual report, but I can take that up with IR afterwards if that's easier.
Okay.
Yeah. Yeah. That might be helpful.
Okay.
Is there a next question?
The next question comes from the line of Jimmy Fan with UBS. Please go ahead.
Hi. Thank you for taking my questions. I have 3, please. First, if I look at slide 56 on the SST ratio, I mean, now you indicated that the ratio could come to 40%, and if I look at the last charts, it's saying it's possibly in the range where you would need to take management actions or capital actions. Could you give some color on what actions you have considered and any developments there? My 2nd question is on non-life growth, and perhaps it's related to the 1st one. I guess, you know, the growth was very strong in Switzerland and also specialty markets in 2020. What's the level of growth you planned for 2022?
Maybe could you give a bit of color on, I mean, on Annelis what's already touched on about, you know, inflation and reserving. I guess, like, how much more have you know, in terms of the inflation you have factored in in your reserving actions versus maybe the level it was in 2020. My 3rd question is on expense ratio. So basically you achieve a quite substantial amount of that efficiency program you set yourself for 2025. Would you consider to revise that target given, like, you are essentially ahead of plan? Thank you.
Okay, thanks. As I understood it, there are not only 3 but 4 questions.
Sorry.
Growth, inflation, and expense ratio. Let me start with answering the question number 2, growth, and then hand over to Annelis. We do not provide you with any growth guidance. However, you mentioned 2 larger, let's say, segments or business lines. The 1st one, Switzerland. In Switzerland-
We are specifically growing in the bread and butter business. This growth, of course, is, you know, on a rather reliable basis. Year on year, we are getting again and again a higher market share in Switzerland. That remains, of course, our ambition. Talking about specialty markets however, as you mentioned before, in specialty markets, we have to manage the cycles. Unlike the bread and butter business, we might, you know, come down with the volume or go up with the volume on a rather, let's say, more dynamic manner than in the bread and butter business. Given the uncertainties, for instance, around the Ukraine crisis and the war, we might have to to manage the cycle proactively.
There are no signals as of today, but we are ready to manage those cycles. We are proving again and again that we are able to manage the cycle. For instance, have a look at the developments in our France franchise. We came up with reducing our portfolio in France within the last 2-3 years. In the meantime, we see a rather attractive rebound there. It's really two different business areas we have to manage. So far to the growth. Now, Anneliese, please, the SST question and then inflation and the expense ratio.
Yes, sure. The SST ratio as of January 1, 2022 is higher than 240%. Given this high capitalization, one could ask the question, why are we not increasing or re-risking a little bit? We are convinced that in these uncertain times, it's wise to have a buffer which is large enough to just be able to take up any market turbulence there is. We are currently not re-risking based on the high SST ratio. We are revising and discussing that in a regular manner. Regarding inflation, we are active in different countries in Europe and Switzerland, and these different countries all have different inflation readings. Therefore, the answer to inflation is specific to each country.
In the year of 2021, even though inflation increased towards the end of 2021, in the numbers there is almost no effect of inflation in 2021. This may be different in the year 2022. Now, all the countries took measures to adapt to the increasing of inflation in non-life. Meaning that prices were adapted either automatically, as for example in Austria or very proactively, as for example in Germany and Spain and also in Italy. Now on the asset side, we don't see inflation and interest rate increase as such a big topic. Rather, we welcome it as our reinvestment rates would be higher with higher inflation. Just to recall, our duration gap is zero in the regulatory model and very small economically. Therefore, a change in interest rates is not affecting us at all regarding the solvency.
Very importantly, it does also not impact cash generation as independent of the value of a bond, it still pays the same amount of coupons. Regarding the expense ratio, we are on very, very good track regarding our efficiency program where we have reached already over one-third of our target. We will not revise the target, at each balance sheet date, but in 2023 we will report for the first time under IFRS 17 and 9, and there we will anyway have to revise part of the targets and we will look at all targets for the summer of 2023.
Okay. Are there more questions?
The next question comes on the line of Thomas Bateman with Berenberg. Please go ahead.
Oh, hi. Good morning, good afternoon, everybody. Just coming back to the cost target a little bit. Obviously you've made such good progress. I'm just thinking about how we get to the CHF 100 million, you know, do we expect a similar level each year? Or is it kind of, there's been a big jump in the 1st year? Yeah, that's the first question. Second question, just on the SST ratio, it's clearly very, very strong. And I appreciate your comments on the additional buffer. But could you give us some of the moving parts? So I'm thinking maybe benefit from interest rates, the benefit from the new credit risk module, and also organic capital generation and the dividend. That would be really helpful.
Just coming back to claims inflation, could you maybe put your non-life markets into 3 different buckets? So maybe one where you see no claims inflation at all, 2, where you see pricing reacting to claims inflation, and maybe the 3rd bucket are ones that you're concerned about. And a 4th question, if I may. On life reserving the extraordinary result was quite high in 2022. I think driven by reserve strengthening there. Should we be worried about that CHF 450 million or so? I guess it was quite high. I wasn't expecting there to be such a large number, given interest rates have gone up a little bit. Yeah, any comments on that would be really helpful. Thanks very much.
Thank you. There's a whole bunch of questions which go to the CFO. It's about the efficiency target, how to get to the CHF 100 million. It's about the SST ratio benefiting in 2021, about the inflation and where do we see claims inflation, and where or whether we should be worried because of the life reserve strengthening. Now, Annelis, can you-
Yes, I can.
Start, please.
Let me start with the SST ratio. There are different influence factors. As always, there is the market, there is a model change, and there is, of course, also our business development. One effect we have is, as you mentioned it, the new credit risk model and others are the quite low credit spreads as of year-end and other effects. There is not really one dominating effect. It's really a collection of smaller effects. As always, you will have the details on that in the Bericht. The name in English, I don't know. The stability report which will be published by the end of April.
On the cost target, will you see similar level of cost efficiencies each year until 2025? Not quite each year for 5 years. The aim is to have a large part of these efficiencies realized in the 1st part of the strategy period in order then to be able to fully start already in the next strategy period. We aim to have a lot of cost efficiencies, let's say, in the 1st 3 years of the strategy period, and then to gain efficiencies also through profitable growth for the remaining 2 years until 2025. We have different efficiency initiatives in place, especially in Switzerland, and some of them do take longer to take effect and some are already taking or showing their effects now.
Now, regarding inflation and claims inflation. We mitigate claims inflation by adapting the premium prices of insurance in non-life in all our country markets. It's a bit like if you would have a financial crisis. With everything happened very fast, we have a problem. If things change slowly, then we are well adapted with our mitigating measures. What do I mean by that? If from one day to another markets drop by 30% and stay at that level, then of course our asset side is impacted.
At the same time, if from one day to another inflation increase to 10 or 20% to be extreme, then of course we have a problem on the claims inflation, because then our policies are too cheap regarding the claims that they come in. However, if changes happen gradually, then we are well prepared for any claims inflation. Now your last question was on life, right?
Yes. On the reserve strengthening. I think there was CHF 450 million in the extraordinary result. You know, is that a number we should be worried about? Is that going to be borne by the shareholder or are there some other mechanisms at play here?
I'm not worried at all. We did a change in the reserving, which we would have to do anyway. It's in German, it's called Summenstatistik, and I'm looking to IR for the translation, but they don't know it at the moment. The point is that this is a required change in Switzerland, which accounts for the fact that if you are a richer person, you generally or you statistically live longer. This has not been accounted before in the reserving tables, but is now accounted for in the so-called change to the Summenstatistik. This change needed a strengthening and that's what we did in this year, 2021.
Understood. It's not necessarily driven by interest rate movements. It's driven by this change in requirement.
Yes.
This change regarding that. Okay, that's clear. Thank you.
More questions?
The next question comes from the line of René Locher with Stifel. Please go ahead.
Yes. Good morning. Can you hear me well?
Yes.
Okay, wonderful. Let's start with slide 14, 15. I mean, I was just looking at the Swiss combined ratio, and I do have an extra file here in front of me, last 20 years. Interesting, the Swiss combined ratio was hovering always at around 85%, you know. I mean, just general question, this particular time over, should we model more with Swiss combined ratio of around 90%? Here again, you know, I mean, no number, but just a view, you know, how the Swiss non-life market is developing. Then on slide 19, on these cash remittances, very interesting. First question here is the EUR 72 million from Caser. Is this a sustainable number? Do we have, like, one-offs in there? And then Caser contributed with EUR 24 million to the dividend, right?
That's a remittance ratio of roughly 33%. Here again, I'm wondering if this is your percentage points for remittance ratio, which looks reasonable going forward. Again, it might be a little bit a naive question, but nevertheless. Is there a bridge from these CHF 497 million net profit allocated to shareholder to the operating cash production of CHF 322 million? That's roughly 65% of these shareholder net profit goes or equals these operating cash production. I was wondering if there's something we could calculate. Then on slide 41. You know, this is this moving parts, these other activities. Yeah, I mean, no details, but just get a little feel what is the reasonable runway going forward.
Is it more the 144 we have seen in 2020 or is it more the 174 we have seen in 2021? Then, yeah, I mean, something with it, teamwork. Now from slide 49, what we have also looked at is a spillover effect from the Russia-Ukraine crisis to oil and gas corporate bonds. So you have, like, CHF 750 million invested in oil and gas bonds. I was wondering if your investment department is also looking into this asset. Perhaps just a last one. You showed last year you have a trading portfolio, roughly CHF 4.6 billion. Here again, I do know it's accounting gaming, but I was just wondering, do we know how this trading portfolio has developed? In Q1, given that bonds lost in value and equity markets are down in Q1.
Thank you.
Rene.
Yes.
I'm just wondering whether I understood all of your 6 different questions. The last one was about the trading portfolio and its achievements. Number 5, Ukraine-Russia spillover effects to our oil and gas assets. Question number 4 deals with the other activities, which however was pretty difficult to understand what you're really looking for.
Mm-hmm.
We gave it a try. CHF 497 million, is there any bridge to the operating cash production?
Mm-hmm.
Caser delivering EUR 72 million and the combined ratio guidance for Switzerland. I'm starting with questions number 1 and 2, and then I'm handing over to Annelis. The 1st question, do we give any guidance as to a specific country market? We don't.
Mm-hmm.
The guidance we give is our target on a group level is between 92%-94%. However, in order to achieve this target, Switzerland as the backbone of its non-life portfolio has to deliver, of course. We do not give you a specific guidance with regard to what we are calculating with. It's still the most profitable backbone in our portfolio, and we do everything that it remains so. Second, Caser. EUR 72 million, is that sustainable? Yes, it is. The dividend, is the dividend sustainable? Yes, it is. Why that? We have banking cooperation partners which are at the same time shareholders of Caser, and they are benefiting in 3 areas. First, they are gaining and earning commissions by giving us business, bringing us business.
Second, they are benefiting if the business they are bringing to Caser is profitable, so there are, you know, specific profit-sharing schemes. Third, they are relying on the dividends. The dividends and what comes with that, the commissions and so on accounts for, depending on the bank, as much as or more than a 3rd of their bottom line profit. The dividend is sustainable, not only because the business is sustainable, but also because the different shareholders want to make sure that the dividend flow is sustainable itself. Now, question number 3, the bridge from the 497 to the operating cash production. Annelis.
Let's start like this. The net profit is an IFRS number.
Mm-hmm.
The cash production is a number that is generated out of the local statutory accounts. There are of course differences between local stat and IFRS and therefore the bridge or the comparison is not easy at all. As you know, we use IFRS in order to have a comparable basis to compare all the accounting numbers for our various countries with all different local accounting schemes. The cash production has to be looked at a bit separate of the IFRS net profit. The cash production is in that sense a more true economic output than the IFRS net profit. Currently, we have no bridge, but I'm happy to discuss with you your thoughts about that maybe in a call once.
Okay. No, that's fine. I mean, you are not the only one. That's okay. You know, analysts they like to calculate, you know. I thought this 65%, you know, would be quite a good number, you know, just to get this operating cash production. It's okay. Fully understood. Thank you.
Asset exposure to oil and gas, as we have a diversified corporate bond portfolio with a really solid rating of single A, mostly in oil and gas, even single A plus. Of course, we are invested as a large asset owner in oil and gas. We also looked at the exposure on a line by line item and.
Yes, the effect on oil and gas is not a general effect, but it really depends also on each of the holdings and each of the companies we have there. We currently have no bad news due to our oil and gas exposure. We are still happy with the exposure we have in this sector. You know, all the oil and gas bonds, they of course go through OCI and not through P&L. Which leads me to your last question, the assets classified as trading. They have developed well, especially on the equity side. Yes, the bonds we have there as trading the convertible bonds due to a favorable spread development towards the end of 2021, they had a favorable development.
Okay. Thank you very much.
We have a follow-up question coming from the line of Peter Eliot with Kepler Cheuvreux. Please go ahead.
Thank you very much. One of my follow-up questions actually was one that René just asked, actually. I'm not sure if we covered what you felt was a good run rate for the other activities segment going forward. You know, whether 2020 was a good level or 2021 or some other level. I did have 2 other questions, please. Firstly on the dividend. I mean, if you ignore the CAT related increase of CHF 0.25, then the sort of normal increase is CHF 0.25. I guess it always used to be CHF 0.2 up to 2020 and then it was held flat in 2020.
My question really is should we think of the CHF 0.25 as a bit of a catch up for last year? Is that simply your sort of current view of the appropriate annual? My other question was on Smile. Just wondering, you know, what the thinking is, you know, why this is the right time to expand into other markets? Yeah, just sort of be interested in the main drivers of that decision on the timing. Thank you very much.
Okay. If I understood you correctly, the first one is referring to slide 41, the other activities and whether there is some guidance. The second one is about the dividend policy. The 3rd one, could you repeat please question number 3?
Yeah, certainly. It was on Smile. I was just wondering, you know, why now, basically? What was the main reason for the decision to expand it now?
Let me start with question number 2 , dividends, then go to Smile, and finally hand over for question number 1 to Annelis. Our dividend policy, as you mentioned correctly, there were steps like you know at CHF 0.20 over the years, or before the split, it was rather you know 1 CHF per year. Our guidance regarding dividends is that we wanna pay out at least CHF 1.5 billion by the end of the strategy period. So you know from your point of view it's not unfair to calculate in a 0.25 steps rather than 0.20 steps. And of course, if the business is running well, then we might increase the dividend.
We wanna at least hold the dividend even in adverse scenarios, and we are pretty proud to be, I think in the meantime, the only stock on the SPI in Switzerland, which paid out dividends since its existence. And we wanna, you know, keep and stick to this promise, going down the road of course. Now, the 3rd question regarding Smile, why now? We are, you know, proud having established a model which is not, you know, fantasy. It's a profitable business. It's not about, you know, any numbers in an Excel sheet, promising, you know, earnings, in, I don't know, 2040.
We really have an established direct online insurance business unit in Switzerland, which is coming up with more than 110 million CHF with a combined ratio on average over the last few years of 90% with new business models such as freemium, which gives us access in the meantime to more than 50,000 non-clients, but people using our apps. So we have a tremendous achievement around that. This gives us a strong basis now in order to go to our other country markets. Why now? We think that it is a trend of all clients or of many clients, let's put it that way, of many clients in all our country markets to go and to look for online models more and more. Why Austria?
Austria is in our view underdeveloped in terms of online insurance solutions. There we have like a first mover advantage. Austria is a market we know, and where we already have a small franchise in online business under another name, and now we are you know launching Smile. The second step, why Spain? Spain is a developed market. However, it's not as competitive in terms of online business as Germany, for instance. We wanna enter as a second market into Spain, which gives us you know in terms of scales a totally different of course potential compared to Switzerland and Austria. It's a developed market but not as competitive as Germany and it opens us you know new opportunities.
We think that in terms of time to market and of efficiency, of cost efficiency, of the model we are based on, it is now the right moment to do so. Now, let's turn to the first question, Anneliese.
Yes. The run rate on other activities was hit in the year 2021 by various negative one-off effects, like the realization or liquidation of an own investment fund, which is realization. We realized CHF 20 million of FX losses that have accumulated over the last 5 or 10 years. This effect of course will not recur again. Also in the year 2021, we had a not good technical results from group reinsurance due to the high Nat cat claims in summer. Generally, there were also some effects from project costs, which we switched to do rather smaller projects which we directly show in the profit and loss rather than activating them and amortizing them over time.
There are a few one-off effects in the 2021 figures, and we expect this other activities number to become lower, I mean, less negative, over the next few years.
That's great. Thank you very much. I guess the area that maybe is most difficult for us to forecast is the costs and other line that obviously was impacted by the project cost that you mentioned. It sounded from what you were saying like maybe we should expect that line to continue at the current rate. I mean, or should we expect you to change that, you know, the number of small projects that are ongoing. Would the sort of CHF -120 be a sort of fair line for the ongoing costs and other?
Yeah. There are, of course, the project costs in there, but not only. There is also, at least that's how we currently show it, fees we get from launching the Helvetia Swiss Property Fund. The real estate fund, which will be a positive effect in this line. As you know, we have already announced to launch another tranche of this Swiss property fund this year. There are different parts in these costs other line, but definitely we work at reducing project costs for the future.
Okay, great. Thank you very much.
The next question is another follow-up from Mr. Jimmy Yu Fan with UBS. Please go ahead.
Hi. Just a very quick one. I think you mentioned that you're gonna reset your targets in 2023. I guess, is it going to be a recalibration of the existing targets just on a different accounting standard? Or you would completely reset the targets given where you will be in the future?
No, it will be mainly a recalibration to IFRS 17. This will not affect all our targets. As for example, the dividend target of CHF 1.5 billion is not affected by IFRS 17. However, for example, combined ratio is affected and return on equity will be affected as examples.
Thank you. Is there maybe a last question?
Yes. The last question is a follow-up from Mr. Bateman with Berenberg. Please go ahead, sir.
Hi there. Sorry, last question. You've obviously had a good track record of doing M&A over a number of years. I'm just thinking about the very high solvency level, good levels of cash generation, you know. Is another deal on the table at some point down the road, or which markets do you think are particularly attractive to you? You know, any color at all around the direction of the business and M&A would be super helpful. Thank you very much.
Okay. I mean, you know, first of all, we are pretty happy having a strong capitalization. Why that? I mean, our business is specifically also a long-term business. Our clients rely on the insurance company to pay also in adverse scenarios. You know, talking about the war in Ukraine and so on, we are pretty happy to have this strong capital base. Now talking about M&A. As of today, there are no such plans. Why that? We first have now to consolidate our acquisition in Spain, of course. Caser is delivering what we promised. However, it's also, you know, about the operating model in the Spanish market and so on.
We wanna really, you know, go down the road by even better leveraging what we acquired in Spain. It's about consolidation. As we say again and again, if there are appropriate targets within our country markets, it's not about expanding our geographies, of course. If there are appropriate and reasonable targets in our country markets where we are in, then we are of course looking at those different targets. There's, you know, for the time being, no specific plan, but of course we wanna develop our company. It has, of course, to cope with our financial targets. We do not wanna dilute our ROE, our dividend policy, our profitability goals. We do not wanna dilute them.
The standards in terms of you know having a look and then realizing acquisitions are pretty high.
Okay. Thank you.
I thank you very much for your interest in Helvetia. Again, we are happy having delivered what we promised. Profitable growth which have been and the NatCat, which have been offset by a very resilient non-life portfolio. Caser delivered what it promised. The dividend is increasing by 10%. The group is in good shape, which is reflected in a very attractive capitalization, talking about S&P and SST. We are happy to answer your question whenever they might arise. Please do not hesitate to contact us. I wish you all the best for the remainder of the day. Thanks.